Both registered for sales of new shares, with the date of first sale in each case being June 13 of this year. As of the filings, the Small Buyout Strategies I fund had sold $30.9 million out of an expected total offering of $42.8 million, while Small Buyout Strategies II had sold $43.2 million out of an expected total of $80 million.

Townsend tells me that the funds raised are “for the purpose of investing in a portfolio of lower middle market private equity buyout funds.” The money is coming from accredited individual and institutional investors.

Townsend did not comment on the funds’ particular strategies, but typically funds-of-funds hold shares in several separate private equity funds that in turn have ownership of companies. That gives added diversification and allows fund-of-fund managers to target multiple industry sectors while still benefiting from the niche expertise of the managers of the funds they buy.

There is debate in the private equity world about the relative merits of the fund-of-funds approach, according to a June article in the journal “Pensions and Investments.” Pension operators are heavy investors in various types of private equity funds.

That article cites data suggesting that returns for even the best-performing buyout funds are declining, and the extra costs associated with managing a fund-of-funds further erodes returns.

“Over a 10-year period ended Sept. 30, 2012, funds of funds offered roughly a 7 percent annualized internal rate of return compared with approximately 23 percent for buyout funds and 19 percent for all private equity, according to Preqin data obtained by Pensions & Investments,” the article says.

But fund-of-fund managers also cited in the article said the approach reduces the risk of losing capital and allows for more predictable returns.